Steel On Up-curve After Hammering

Price Hikes Of Up To 10% Announced As Imports Decline

February 02, 1999|By Michael Arndt, Tribune Staff Writer.

The American steel market looks like it has finally bottomed out.

After slashing prices for months in a sometimes futile effort to compete with a glut of low-priced imports, several U.S. steel companies are announcing across-the-board price increases of as much as 10 percent.

Word of the price hikes, some of which were effective immediately, comes only days after the Commerce Department reported that steel imports from Japan and elsewhere dropped sharply in December after hitting record levels for months.

"What this says is that they've finally put up a dam and got the market under control again," said Michael Locker, an independent analyst with Locker Associates in New York.

The latest to raise prices is Ispat Inland Inc. The East Chicago-based subsidiary of Ispat International NV said Monday it will increase base prices of all flat-rolled carbon steel products by $30 a ton on May 1.

LTV Corp. also said it is raising spot market prices of its flat-rolled steel products by $30 a ton, effective April 4, while Steel Dynamics Inc. has told customers it is increasing prices of the same goods by $20 to $30 a ton immediately.

For Steel Dynamics, base prices now range from roughly $300 a ton for hot-rolled steel to about $430 a ton for hot-dipped galvanized products.

As substantial as the increases are, however, prices are still significantly below year-earlier levels, when hot-rolled steel sold for an average of $320 a ton and hot-dipped galvanized sheet went for $590 a ton.

"It's a step in the right direction, but this still makes hot-rolled, cold-rolled and galvanized steel the bargain of the century," Keith Busse, chairman and chief executive of Butler, Ind.-based Steel Dynamics, said in an interview Monday.

Moreover, Locker pointed out that large steel companies recently agreed to long-term contracts with their biggest customers that lock in price cuts of 2 to 5 percent. That means these companies may not gain as much from a rebounding spot market as anticipated.

The market's new dynamic also came too late for Geneva Steel Co. The Vineyard, Utah, company filed for Chapter 11 bankruptcy protection Monday, making it the third steelmaker to declare bankruptcy since

September.

Flat-rolled products are the most widely used in the industrial economy; they are fabricated into everything from automobile fenders and refrigerator bodies to corrugated building panels and grocery-store shelving.

Though demand for these goods has generally remained strong, dipping only when General Motors Corp. was shut down by strikes last summer, prices fell by a third since mid-1998 as foreign mills swamped the U.S. market after demand in overseas markets shriveled.

A coalition of domestic steel companies fought back last fall, lodging unfair trade complaints with the government against makers of hot-rolled sheet steel in Brazil, Japan and Russia. They warned they would follow up with complaints against more flat-rolled products.

As layoffs mounted, Congress and the Clinton administration began chiming in, urging foreign producers to curb shipments to America.

Apparently heeding these warnings and preliminary government rulings against them, foreign steel producers have backed off. Based on early data, the Commerce Department said overall imports decreased 32.0 percent in December from November. Monthly shipments from Japan were off 48.8 percent, while imports from Russia were down 79.7 percent and Brazil's slipped 15.2 percent.

Imports appear to have slumped further in January, steel executives said.